E-commerce: How to Use Analytics to Plug Holes in the Conversion Funnel

A good Web analytics platform can tell you a lot about how consumers act while they’re on your site, but how can you leverage that data to improve sales? The key is to view customer conversion not as a single numerical result at the end of the purchase cycle, but as an elongated process with many smaller conversions along the way, said Pinny Gniwisch, vice president of marketing at online jewelry merchant Ice.com during a session at the recent Mid Market eTail conference in San Francisco.

“We look at each section of the site as a number, or percent of the monetary value that the site generates,” he said. For instance, if you look at all of the visitors to Ice.com’s main site, 60 percent get to the product search page, 30 percent make it to the product details page and 3 percent actually place an order. Gniwisch noted that Ice.com looks at each piece of that conversion funnel, conducts A/B testing on each section and tries to convert more consumers at each stage. “If you increase each part of that funnel by one percent,” he said, “you see a 40 percent increase in sales conversion.”

Following are Gniwisch’s steps for effective analytics and testing:

1. To test each part of the site separately, Gniwisch noted that you may need more money in your testing budget. He recommended determining how much each portion of the site is worth to you, then showing your CEO how much you hope to gain by making changes.

2. Create a road map for testing. Once a budget is in place, determine which individual pieces of the conversion process you want to affect and in what order you want to change them, Gniwisch said. “You can change things on your home page and shopping cart at the same time, but be careful about changing more than one thing at a time on the same page,” he pointed out.

3. Determine how long you need for each test to be valid, then act. Gniwisch noted that he prefers to respond quickly to Web tests, and adjusts his site on the fly. “We think you have to get between 100 and 150 orders for a valid test,” he said. For instance, Ice.com tested two landing pages off of an MSN ad in less than a day. “We had the control, which was information heavy, and the test, which was more artsy and image heavy,” he said. “Whichever test won out in the morning stayed up all day long.”

Gniwisch pointed out that tests like that one aren’t about driving more traffic to his Web site, but rather pushing the traffic that does come to Ice.com deeper into the site. “If I have a 1 percent conversion rate on my site, and I have the opportunity to bring more people on the site, sure I’ll get more sales,” he said. But he believes that’s the wrong way to look at the problem. “If you plug the funnel and fix the places where people are exiting, you can make more money with the people who already are coming to your site,” he said. Using that attitude as a guide, he was able to increase conversion from 1.2 percent in 2005 to 3 percent in 2006, all without spending more on ads to drive more traffic to the site.

He recommended focusing on the following metrics as a starting point for further analysis on your site:

Number of visitors;
page views;
step-by-step conversion rates; and
sales per visit

And what can go wrong if you don’t use analytics? Gniwisch concluded that you can make “a particular mistake, then make it over and over again, because you don’t know it’s wrong!”